When you purchase a new home, you should receive a Closing Disclosure form detailing the terms of the mortgage shortly before the closing date. Your lender or closing agent may send you the form via mail or email, or you may have to download it. It’s important to review all the details carefully.
Information Included on the Closing Disclosure Form
The Closing Disclosure will be broken down into several sections. It will include information on the loan terms, such as the amount borrowed, interest rate, monthly payments (including principal and interest), estimated costs for homeowners insurance and property taxes, and a breakdown of closing costs. The Closing Disclosure will tell you the amount you will need to close on the house and will include information on payments you have already made. It will also provide information on the seller’s costs due at closing and any amounts the seller has agreed to pay toward your closing costs.
How to Figure Out if the Closing Disclosure Is Accurate
You should have received a Loan Estimate a few days after you applied for a mortgage. That form includes information on the loan terms, such as the mortgage amount, interest rate, monthly payments and a balloon payment or prepayment penalty, if applicable. It also includes estimates for taxes, insurance and closing costs.
The Closing Disclosure form will include the same information. Before you sign any closing paperwork, carefully compare the Loan Estimate and Closing Disclosure to look for any discrepancies.
Why It’s Important to Carefully Review the Closing Disclosure
If you sign a document that contains errors, you are agreeing to the terms. If you sign a form with the wrong interest rate, for example, you may wind up paying a lot more than you should over the life of the loan.
The lender is legally required to provide you with the Closing Disclosure form at least three business days before closing to give you enough time to review it. Go through the information on the form with a fine-toothed comb and question anything that doesn’t seem right.
Make sure that your name and the name of your co-borrower, if any, are spelled correctly. Some fees may change between the time when the Loan Estimate is issued and the closing date, but it’s illegal for certain fees to change. Ask questions about anything that doesn’t seem right or that you don’t understand.
If you see an error, contact the lender or your real estate agent immediately to have it corrected. Then review the revised Closing Disclosure to make sure everything looks right. That might delay the closing, but it can help you avoid paying more than you should, simply because of an error.